5. “Third-Party Defendant Michael Parkins' Motion
To Dismiss” (document #24), as well as the parties'
briefs and exhibits.

This
matter has been referred to the undersigned Magistrate Judge
pursuant to 28 U.S.C. § 636(b)(1) and these Motions are
now ripe for the Court's consideration.

Having
fully considered the arguments, the record, and the
applicable authority, the undersigned respectfully recommends
that “Third-Party Defendant Chongqing Rato Power Co.,
Ltd.'s Motion To Confirm Arbitration Award And Enter
Final Judgment” (document #23) and “Certain
Third-Party Defendants' Motion to Dismiss or,
Alternatively, Stay and Compel Arbitration of Defendants
Roger Leon And Keith Piercy's Third-Party Claims”
(document #21) be granted; that “Certain
Third-Party Defendants' Motion to Dismiss Defendants
Roger Leon and Keith Piercy's Third-Party Claims for Lack
of Personal Jurisdiction” (document #20) and
“Plaintiff and Certain Third-Party Defendants'
Motion to Dismiss Defendants Roger Leon and Keith
Piercy's Counterclaims and Third-Party Claims”
(document #22) be denied as moot; and that the Court
take no action on “Third-Party Defendant Michael
Parkins' Motion To Dismiss” (document #24), and
decline supplemental jurisdiction of the remaining state law
claims as discussed below.

I.
FACTUAL AND PROCEDURAL BACKGROUND

Third-Party
Defendant Chongqing Rato Power Co., Ltd. (“Rato”)
is a Chinese company with its headquarters and base of
operations in Chongqing, China. Rato and its subsidiaries
develop, manufacture and sell general-purpose engines,
motorcycles and related products.

In
August 2010, Defendant Roger Leon approached Rato with a plan
for a new company that would distribute its outdoor power
products in the United States. Leon formed Plaintiff Denver
Global Products, Inc. (“DGP”), a North Carolina
corporation, to operate the new business. Initially, Leon and
Third Party Defendant Larry Wang each owned fifty percent of
DGP. Through a series of transactions, Rato acquired
ownership of DGP from Leon and Wang. Leon served as President
of DGP.

These
transactions involved an Initial Agreement, followed by a
series of contracts referred to by Rato as the Substitute
Agreements, including the Joint Venture Agreement and the
Equity Agreement. With the assistance of an interpreter and
represented by Chinese counsel, Leon negotiated and executed
these agreements with Rato in China. Each Substitute
Agreement contains an arbitration clause requiring that all
disputes related to the Substitute Agreements be arbitrated
in China.

On
December 30, 2015, DGP filed this lawsuit in the North
Carolina Business Court alleging that Defendants embezzled
its funds and made unauthorized payments to key employees to
induce them to resign. DGP and Defendants Leon and Piercy are
North Carolina residents.

Defendants
responded with twelve counterclaims as well as third party
claims against Rato, Wang and some of Rato's
Chinese-based affiliates, officers and directors
(collectively referred to as Rato Third Party Defendants).
Defendants also pled third party claims against Michael
Parkins, DGP's former Chief Financial Officer. All of the
parties' claims arise under state law.

While
the lawsuit was pending in the Business Court, the Rato Third
Party Defendants filed a Motion to Compel Arbitration seeking
to arbitrate all but two of Defendants' counterclaims and
third party claims against them. Rato Third Party Defendants
do not seek arbitration of Defendant Piercy's claims for
tortious interference with a release agreement and negligent
infliction of emotional distress.

Defendants
opposed the Motion to Compel Arbitration, asserting that the
Substitute Agreements' arbitration provisions are
invalid.

Rato
responded by commencing two arbitration proceedings before
the Chongqing Arbitration Commission, seeking declaratory
judgments that the Substitute Agreements' arbitration
provisions are valid as to Leon. Defendants received a copy
of Rato's arbitration ...

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